Episode•January 20, 2022•25 min

Managing Business Finances with Melissa Houston | Ep. 85

Tiffany sits down with Melissa who breaks down how to manage a business from an accounting perspective by recognizing profit from revenue. Melissa shares her tips on getting your books in order as a business owner and why every business owner needs a cash reserve. About Our Guest Melissa Houston is a CPA with over 20 years of experience. She is a Financial Strategist for CEOs where she helps successful business owners increase their profit margins so they keep more money in their pocket and increase their net worth. Melissa is a columnist at Forbes.com and the host of The Business Society podcast. Connect with Melissa Facebook: https://www.facebook.com/melissa.houston.1420354 Instagram: @melissahoustoncpa Twitter: @melissahcpa Connect with Tiffany on Social Media Facebook: Money Talk With Tiff Twitter: @moneytalkwitht Instagram: @moneytalkwitht LinkedIn: Tiffany Grant This podcast uses the following third-party services for analysis: Podcorn - https://podcorn.com/privacy OP3 - https://op3.dev/privacy

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Key Takeaways

1
Focus on profit, not just revenue
Many business owners celebrate high revenue numbers but overlook expenses that can eat up profits
Even seven-figure launches can result in minimal profit or losses when expenses are high
Hiring a bookkeeper early helps identify money leaks and improve profitability
2
Maintain a cash reserve for business stability
A cash reserve functions like an emergency fund for your business
It provides stability during economic downturns and covers unexpected expenses
Apply for a line of credit when business is doing well, not when you desperately need it
3
Create a 12-month financial projection when scaling
Growth increases both revenue and expenses—plan both carefully
Maintain consistent profit margins as you scale, not just increasing revenue
Review actual results monthly against projections to catch issues early
4
Address money mindset issues as a business owner
Recognize and forgive past financial mistakes rather than letting them define you
Value your services appropriately—charge what you're worth plus tax
Continuously check your mindset as money issues can resurface unexpectedly

Intro

Tiffany interviews CPA and financial strategist Melissa Houston about managing business finances, distinguishing between profit and revenue, and building financial stability.
Melissa Houston is a CPA with over 20 years of experience, a Financial Strategist for CEOs, Forbes.com columnist, and host of The Business Society podcast. She helps business owners increase profit margins and net worth.

Website Facebook Instagram Twitter Forbes Column

– Profit vs. Revenue

Melissa explains that profit is essential for business survival, but many owners focus on revenue instead.

If you're making a million dollars in your launch, that's fantastic. But you really need to look at what's going on in your expenses.
– Melissa Houston

Tiffany shares how hiring a bookkeeper revealed her business was barely profitable despite high revenue.

– Getting Books in Order

Business owners should hire a bookkeeper early to identify money leaks. Even if you're good at bookkeeping, recognize when you need a second set of eyes.

The longer it takes for you to look within your business and see what's going on, the more money you're losing.
– Melissa Houston

– Building a Cash Reserve

Three reasons businesses need cash reserves:

Stability during economic downturns

Covering unexpected expenses

Getting through seasonal slow periods

Having a cash reserve is like having an emergency fund.
– Melissa Houston

– Line of Credit Strategy

Apply for a line of credit when business is thriving, not when you need it. Approval chances are much higher during good times.

– Bank Balance vs. Profit

What's going on in your bank account is not profit.
– Melissa Houston

Business owners should create a financial plan (not a budget) to track actual profit and expenses.

– Scaling and Financial Planning

When scaling, create 12-month projections that account for growing expenses alongside revenue. Maintain consistent profit margins.

If you're making $10 million but your profit margin dropped from 20% to 5%, that's a red flag.
– Melissa Houston

Review actual results 10-14 days after each month ends to catch issues early.

– Mindset and Self-Forgiveness

Our mistakes do not define us.
– Melissa Houston

Recognize money mindset issues, forgive yourself, and seek professional help when needed. Value your services and charge appropriately.

Resources

Topics

business financeprofit vs revenuecash reservesbookkeepingfinancial planningscaling businessmoney mindsetCPA advicebusiness strategyemergency funds